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10 CHAPTER 2


argument implies that the state has absolutely no interest in changing a policy framework, such as that governing production of fertilizers, that offers a wealth of rent-seeking opportunities. Because the Department of Fertilizers (DoF) with- in the Ministry of Chemicals and Fertilizers (MoCF) exists solely to protect the interests of the fertilizer firms, it would seem logical for it to oppose dismantling the framework that gives the department its raison d’être, its source of power, and its opportunities for rent seeking. However, as one department among many within the Indian government, it has to engage with other players in the reform process. Other ministries, such as the Ministry of Finance (MoF), may demonstrate the developmental aspect of the Indian state in the debate on fertilizer policy. Neither of these formulations, however, explains why policy change does not take place in certain areas. A tendency to treat the state as a unitary player is perhaps partly to blame. The neoclassical argument holds that the state has its own interest. In contrast, this report shows that the state has mul- tiple interests. Each department and ministry has its specific objective, and, faced with reform efforts, each negotiates toward a position that protects its core interest (Varshney 1998, 58–60). In this latter formulation, the state often demonstrates a rather schizophrenic character, with different departments’ support for conflicting and often opposing goals leading to stalemates. Other scholars have focused on the role of the legislature (Nelson 1989; Haggard and Kaufman 1992; Haggard and Webb 1994). Cross-national studies have shown that reforms are more likely to succeed under a majority govern- ment than under a minority or coalition government. However, the Indian case suggests the importance of looking beyond legislative majorities and coalition governments to analyze institutional design and the extent of the legislature’s role in economic policymaking. Following Tsebelis (2002), one needs to ask on whom Indian political institutions confer veto power. In India, the Parliament plays a dual role in economic policymaking. First, a majority is required to pass the budget every year, and if the budget is not endorsed, the government’s survival is jeopardized. Any reform measures embedded in the budget require legislative approval. However, the government can also initiate economic policy changes through executive decisions without seek- ing legislative approval. Such policy changes are primarily the outcome of negotiations among cabinet members and rules governing the work and juris- diction of specific ministries. In such cases, coalition politics influences the outcome of the negotiations among cabinet members: the coalition manag- ers, particularly the prime minister and other leaders of the majority party, must pay attention to the specific interests of smaller coalition partners, whose cooperation is crucial to the coalition’s survival and success. Similar considerations apply at both the national and the state level. Even though the legislature does not vote on the reforms that are the result of executive decisions, it still plays an important role: it serves as the


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